Monday, August 26, 2013

Standard trademark claim, ill-fitting nominative use analysis

E Clampus Vitus v. Steiner, 2013 WL 4431992 (E.D. Cal. Aug.
16, 2013)

Plaintiff sued a number of defendants for infringement of
its trademarks. After the court kicked
out the earlier complaint for insufficient specificity, ECV filed an
amended complaint, and this one largely did the job.ECV alleged that it owned marks for “E
Clampus Vitus,” “Clampers,” “ECV,” and related design marks using symbols and
words; it used them to identify members of its historical organization, to
notify members of upcoming events, and to sell goods including pins, headgear,
and shirts.

Defendant Joseph Zumwalt Chapter 169 E Clampus Vitus is a
corporation, and the individual defendants are former ECV members who allegedly
created the Joseph Zumwalt Chapter.ECV
alleged that they used its marks on at least 6 specific occasions since 2011,
including events at which they sold pins, hats, and T-shirts using ECV’s marks
and marched under an “E Clampus Vitus” banner.In one case, when they sold food and other goods under a “Georgetown
Clampers” banner, ECV allged that its local chapter couldn’t participate in the
same event because the authorities mistakenly issued a permit to the
defendants, believing them affiliated with ECV’s local chapter.Most recently, defendants allegedly created an
online forum for “Joseph Zumwalt ECV 169” to sell products such as lighters
bearing ECV’s marks, while ECV alleged that it conducts similar sales to raise
funds for charitable purposes. ECV sued for trademark infringement and
state-law unfair competition and false advertising.

The court first found that ECV had sufficiently stated
claims against individual named defendants.The complaint alleged specific details about their particular roles in
identified events.Likewise, it properly
alleged sufficient facts to impose individual liability for the corporate
defendant’s actions, even if they weren’t necessarily corporate officers: the
complaint allged that the individual defendants created the corporation to
exploit ECV’s marks. Being volunteer members of an organization wasn’t the
problem; the problem was these specific defendants’ allegedly unique role in
creating the corporation and organizing the infringement.Active participation as a moving force in the
decision to infringe can justify individual liability.Here, ECV alleged that the individual
defendants acted “knowingly, intentionally and deliberately” to infringe.

The court also rejected the nominative fair use defense on
the pleadings, somewhat sketchily.On
factor (1), the court described the test as allowing a use “only when no
descriptive substitute exists,” which is just wrong, and stated that defendants
could just identify themselves as “Joseph Zumwalt Chapter 169” without
infringing.On factor (2), using no more
than necessary, again despite precedent stating no disclaimers are required,
the court found that “Defendants similarly fail to identify limits on their use
of Plaintiff’s marks. Unlike the defendant in Playboy, Defendants fail to identify how they actively disclaimed
any sponsorship or endorsement.”More
persuasively, the court pointed to the allegations that defendants claimed that
their events were “official,” confusing the public into thinking them
authorized by ECV—a serious factor (3) problem.

The amended complaint also alleged facts sufficient to
sustain a likely confusion claim.ECV
alleged that the parties’ activities were similar, if not identical—they sold
the same types of merchandise at similar events, and conducted similar online
raffles.ECV also specifically
identified the marks allegedly infringed, and alleged that the word marks were
used exactly on hats, shirts, and pins for sale, as well as on banners and in
advertising.The parties allegedly
operate in the same geographic areas.Though ECV didn’t need to allege actual confusion, it did allege
specific facts about confusion (new members mistakenly enrolled with defendants
instead of ECV), and it alleged intentional attempts to use ECV’s history and
marks to cause confusion.This was
enough to plausibly plead confusion, even if it didn’t cover every factor.

Though ECV didn’t specifically allege that the goods
defendants sold weren’t genuine, it was a fair inference from the complaint,
and anyway ECV also alleged that defendants “inappropriately used Plaintiff’s
marks in advertising,” which was an independent basis of infringement.

Defendants argued that the California law claims failed
because they didn’t allege lost money or property, aka “some form of economic
injury.”But ECV alleged that it had
lost income and profits from lost merchandise sales, which was enough.And the complaint met Rule 9(b)’s standard,
as required for a California FAL claim: it identified specific defendants,
specific events, and specific activities that constituted false
advertising.“Rather than using
conclusory language, the FAC specifically alleges that this use of terms such
as “official” along with Plaintiff’s marks could be misleading because
potential members may think Plaintiff is hosting or sponsoring the event.”

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